This Nurse is Leaving Legacies Like the Rockefeller’s- Ep. 13
How to Boost Your Retirement Savings with Self-Directed Accounts
Did you know that you can use your retirement dollars to invest in private or alternative assets? That's right, you can use your retirement funds to open a Self-Directed Individual Retirement Account with Rocket Dollar. You can use a Self-Directed IRA to invest in real estate, crypto startups, and other exciting opportunities.
In episode 13, I chat with Dan Kryzanowski, the Executive Vice President of Rocket Dollar. Dan breaks down alternative ways to invest and save for retirement. Listen to the episode for the full breakdown, but here I highlight the key concepts. So listen to the podcast, take notes from this article, and when you are ready to invest more, implement this strategy if it’s right for you.
What is a Self-Directed IRA or Self-Directed Solo 401(k)?
A Self-Directed IRA (SDIRA) and Self-Directed Solo 401(k) are both retirement savings accounts. With both accounts, you get all the benefits of a typical retirement account. However, with these accounts, you can invest in more than stocks and mutual funds.
You can invest in real estate, businesses, peer-to-peer lending, cryptocurrency, or whatever you want, with a few exceptions. In the self-directed world, you cannot invest in life insurance, collectibles (think collectible cars, Air Jordans), or anything that directly benefits you or your linear family members. This means you cannot invest in your own company or buy an apartment that you or your kids plan to use on the weekend. Your siblings and in-laws, however, are not considered linear family.
The SDIRA is for anyone currently employed, whereas, you are only eligible for a Self-Directed Solo 401(k) if you are self-employed (think 1099 recipient). In a Self-Directed Solo 401k, you can contribute up to $56,000 a year. Any income you make from side hustles--driving Uber, consulting, or working as a freelancer, is qualified income for a Solo 401(k). The best perk is, you can borrow up to $50,000 from a Solo 401(k), without tax penalties, as long as you pay it back within five years.
How to use a Self-Directed Retirement Account
Imagine you’re at your first corporate job where you get a regular salary and invest in your employer’s 401(k). After ten years, you decide it’s time to leave. Don’t keep your retirement funds at your old job. Instead, transfer them to a self-directed IRA.
Let’s assume you saved $200,000. With this money in your SDIRA, you can invest in real estate, a friend’s startup, whatever you want. Since there haven’t been any federal rulings on cannabis, Dan recommends you don’t invest in cannabis right now.
Say you decide to invest in real estate. One option is to lend money to an investor at a 10% interest rate. The money comes from your SDIRA and when the real estate investor sells the house, they pay you the loan amount plus 10% interest.
Another option would be to ask the real estate investor for equity or a percentage of ownership in the house. Then when the investor sells you get a percentage of the profit based on your equity agreement.
Since you cannot use the property for yourself or your family, hire a property manager. The personal interest rule is a strict one. You cannot stay in the property, change light bulbs, physically touch the property, or use your personal funds on the house. It’s important you do not commingle your personal checking account with your retirement funds for this property.
The good news is your old 401(k) was earning a 2% return. But now that you are invested in real estate if your local market is booming, you now earn a 10% return on your real estate investment. You can access the money in your SDIRA for yourself once you’re 59 and a half.
Why Choose Rocket Dollar?
Rocket Dollar helps you manage and invest your retirement assets for just $15 a month. They offer this low fee regardless of the number of assets you have or the number of transactions you do after you pay a one-time setup fee of $360. If you use my referral code in NOF 19, you get $50 off when you sign up.
One unique feature of Rocket Dollar is their checkbook control feature, which differs from a lot of the industry. With this feature, you save time and have direct access to your money. Making investing as simple as writing a check, swiping a debit card, or wiring the money.
Rocket Dollar is empowering folks, whether you have a $1 million, $100,000, or $10,000. An account with Rocket Dollar can help boost your retirement savings and better diversify your assets.
Signing up takes five minutes. You insert your personal information, add a credit card for your $15 a month fee, and upload your driver's license. The credit card is used so they don’t have to take the fee from your retirement savings. Then, you electronically sign a few forms, fill out the forms to transfer your money from your current account, and voila you are a Rocket Dollar customer. You can start investing the money in your SDIRA or Solo 401(k) however you like as long as it’s within the investment rules.
Start Investing in Alternative & Private Assets Today
Rocket Dollar is awesome for broadening our investment options. Finally, we have access to something that was once only available to elite investors. This company has not only made these types of investments accessible to us, but they have also put it online and streamlined the process. So it's easy to understand, and it's totally actionable.